Microsoft revenue falls short of expectations

Citing a mixed enterprise software environment, Microsoft on Thursday reported increases in revenue and net income, but revenue fell short of expectations.

Citing a mixed enterprise software environment, Microsoft on Thursday reported year-over-year increases in revenue and net income for its third fiscal quarter. But revenue fell short of Wall Street expectations.

The software maker earned US$2.56 billion, or US$0.23 per share, in the quarter ended March 31, the company said in a statement. That compares to earnings of US$1.32 billion and US$0.12 per share in the year-ago period, Microsoft said.

Legal costs pushed down earnings in this year's third quarter by US$0.05 per share, and in last year's third quarter by US$0.17 per share, the company said. Unspecified charges for stock-based compensation of Microsoft employees also ate into earnings per share in both quarters.

Revenue grew by 5 percent year-on-year to US$9.62 billion, from US$9.18 billion. Microsoft's Server and Tools business was especially successful in the quarter, with 12 percent revenue growth year-on-year on double-digit sales increases of the SQL Server database and Exchange e-mail server product, Microsoft said.

Still, revenue fell short of analyst expectations of US$9.83 billion, according to a consensus estimate from Thomson First Call.

Microsoft also missed its own revenue forecast. In January, the company said it expected third quarter revenue to be at least US$9.7 billion.

Microsoft is optimistic about its next fiscal year, which starts in July and ends June 30, 2006. The company expects to earn between US$1.26 and US$1.30 per share on revenue between US$43.3 billion and US$44.1 billion.

"The quarter played out largely as expected. Our slight revenue miss was driven primarily by the combination of unfavorable exchange rate movements since we gave you guidance in January and a greater than expected decline in commercial and retail licensing for the client business," said Curt Anderson, general manager of investor relations at Microsoft. Overall Windows client revenue was up 2 percent.

Sales of the Windows client operating system and Office, Microsoft's two biggest products, showed little growth and revenue at the MSN Internet business decreased slightly.

Revenue at the Information Worker group, which includes Office, also increased 2 percent, primarily as a result of currency exchange rate benefits. Retail sales of Office were strong, but corporate users not renewing upgrade contracts held down the group's results, Microsoft said.

MSN revenue declined 5 percent as more customers switched away from Microsoft's MSN Internet Access dial-up service. Advertising and subscriptions for other MSN services increased, Microsoft said.

Join the newsletter!


Sign up to gain exclusive access to email subscriptions, event invitations, competitions, giveaways, and much more.

Membership is free, and your security and privacy remain protected. View our privacy policy before signing up.

Error: Please check your email address.
Keep up with the latest tech news, reviews and previews by subscribing to the Good Gear Guide newsletter.

Joris Evers

IDG News Service
Show Comments

Brand Post

Most Popular Reviews

Latest Articles


PCW Evaluation Team

Jack Jeffries


As the Maserati or BMW of laptops, it would fit perfectly in the hands of a professional needing firepower under the hood, sophistication and class on the surface, and gaming prowess (sports mode if you will) in between.

Taylor Carr


The MSI PS63 is an amazing laptop and I would definitely consider buying one in the future.

Christopher Low

Brother RJ-4230B

This small mobile printer is exactly what I need for invoicing and other jobs such as sending fellow tradesman details or step-by-step instructions that I can easily print off from my phone or the Web.

Aysha Strobbe

Microsoft Office 365/HP Spectre x360

Microsoft Office continues to make a student’s life that little bit easier by offering reliable, easy to use, time-saving functionality, while continuing to develop new features that further enhance what is already a formidable collection of applications

Michael Hargreaves

Microsoft Office 365/Dell XPS 15 2-in-1

I’d recommend a Dell XPS 15 2-in-1 and the new Windows 10 to anyone who needs to get serious work done (before you kick back on your couch with your favourite Netflix show.)

Maryellen Rose George

Brother PT-P750W

It’s useful for office tasks as well as pragmatic labelling of equipment and storage – just don’t get too excited and label everything in sight!

Featured Content

Product Launch Showcase

Don’t have an account? Sign up here

Don't have an account? Sign up now

Forgot password?